Euro Shoe finds the right fit for its distribution operations

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Euroe Shoe Unie is a well-known retailer in Belgium and the Netherlands. Until recently, the companys stores were supplied from 2 separate distribution centres. Today, Euro Shoe Unie operates from a single state-of-the-art facility in Belgium, supplying 23 million boxes to 530 individual stores each year.

Euro Shoe Unie is well-known in the Netherlands under the brand names Van Woensel and Bristol. In Belgium, the company holds various popular brand names, such as Avance, Primo, Shoe Discount and Shoes in the Box. Until recently, stores in the two countries were each supplied by their own distribution centre. Belgian stores were supplied from Diest, Dutch stores from Zwanenburg. Existing facilities were not automated and were seriously out of date. Therefore the company consulted Vanderlande Industries to review its distribution operations. In 2002, this resulted in the decision to centralise activities in one completely new facility in Beringen-Zuid, Belgium. A look at what has happened since then.

The new warehouse occupies a 22,000 square metre area, with 35,000 square metres of workable floor space over several levels. The layout enables highly efficient goods handling, so products can be shipped quickly.

Goods are brought in by road and over water. The location on the canal enables the company to unload incoming goods in containers at its own terminal. This is especially beneficial during peak season, when some thirty containers are unloaded each week. It also means Euro Shoe Unie can handle a lot of incoming goods at the same time. One week before a container arrives, Euro Shoe Unie receives an advanced shipping notice, so staffing levels can be planned.

Incoming goods are unloaded on eight loading/unloading docks. Pallets are unloaded via conveyors and are sorted automatically by SKU. About eighty percent of incoming goods is put on pallets and stored in pallet racks (with 3,240 pallet locations and 1,080 pick locations). The other twenty percent goes to high-bay storage (7,000 pallet locations). Individual boxes go to shelving (with sufficient capacity for 550,000 shoe boxes). Individual items, such as textiles, are stored in baskets.

Order picking takes place in six pick waves per day. Each wave involves some forty stores, meaning that picking takes place for roughly 240 stores every day. The pick waves for the Dutch stores are mainly carried out in the morning, whereas picking for the Belgian stores is basically carried out in the afternoon and evening. Every store is supplied twice and sometimes even three times.

After picking the goods, operators place the items on the conveyor which takes them to one of forty outfeeds. Each of these outfeeds has two outputs, one for outer boxes coming from the flow racks, and one for single-pair boxes. Operators first pick the heavier outer boxes into roll cages, and then the single-pair boxes. The roll cages are then collected by trucks to leave the facility via one of the fourteen outbound docks. Euro Shoe Unie also takes care of returns and transfer flows between stores.

Bart Rayen is CFO at Euro Shoe Unie and the driving force behind this project. He explains how the new distribution centre came about and how it is running today. The large volume we had to process made us decide that it would be better to have a single location. Automating two sites would not pay off for us. We chose to house our central activities in Belgium. We chose a site not far from our existing facility, so that we could maintain our permanent staff. The new site had the required surface area and was close to a canal, giving us the added advantage of bringing goods in by ship.

Once the decision to centralise the distribution activities had been taken, things moved on very quickly. The land was purchased and the distribution centre concept was developed all at the same time. The entire facility was designed around this concept.

B. Rayen: We wanted to have the entire warehouse up and running by July 2004. This was quite a challenge, because we had to build the facility and put together the complete automation, all within one year. In addition, we had just decided to outsource our transport activities to a single carrier from then on. And last but not least we were also switching our IT systems over to SAP at that time.

Two different goods flows

B. Rayen: We have two completely different goods flows, which was quite an important factor in designing the concept. At the start of the summer and winter seasons, our collections are pushed to our stores. Our collections include not only shoes and boots, but clothing and accessories as well. Eighty percent of the goods we receive leave our facility within three days. Deliveries in this flow are often made in pre-pack cartons, which mostly contain some ten pairs of shoes with the same reference, but in various sizes. Once sales really get going we start restocking our stores. This is controlled by the cash register software which is also new linked to the central SAP system. As soon as a minimum level is reached in a store, an order is generated in SAP initiating the pull flow. At the end of the season we try to 'push' any remaining stock to the stores again as much as possible to sell it in clearance sales.

The concept chosen for the facility was developed in consultation with Vanderlande Industries. B. Rayen: Another supplier suggested implementing a cross-docking operation. But simulations showed that we would need at least double the surface area for that concept compared with the Vanderlande concept. We do now have a very short-term buffer stock in the flow racks, but this system is much more efficient for us. In addition, Vanderlande Industries has extensive experience in the shoe industry. That was very important for us.

Our entire warehouse is RF (radio frequency) controlled. We selected SAP LES as the warehouse management system (WMS). That was an easy decision actually: since we already had the SAP ERP system, integration would not be a problem. We were convinced that the SAP WMS had been developed in sufficient detail for what we do here. With its vision Logistic Software Suite Vanderlande Industries coupled SAP LES to the logistic systems in our distribution centre.

Optimising efficiency

B. Rayen: Although it was a challenge, we managed to get through the start-up phase quite well, and that with a completely new facility, a new automated material handling system, a new ERP system, a new WMS, a new carrier and new staff. We had to start delivery of our winter collection in July 2004, so we were immediately thrown into the deep end. The first two weeks we had some problems due to lack of experience and overall work load. After that everything went quite well. By the time of the official opening in mid September the warehouse was running according to our expectations. At that time we did, however, decide not to transfer the Belgian activities over the next season after all. Instead we decided to wait until the end of 2005, when all remaining issues would have been removed from the logistic system and from SAP. They were minor things, but they had to be solved. Our people also needed some time to handle the changes and to get fully accustomed to the new system. After the second peak period we already noted a considerable improvement in our efficiency. In the meantime, the move of our Belgian activities has also been completed. This was also a very busy time and far from easy, because the people who came from Diest now suddenly had to work shifts. This also meant that we had to consult with trade unions since labour conditions had changed.

The simultaneous change to an external carrier also required some significant adaptations, especially for store owners. B. Rayen: Products are supplied in roll cages now, which was not the case in the past. Stores have to be able to bring in the roll cages. Once they are unloaded, they have to be folded up and handed back to the next driver who comes by. Our staff also had to learn how to fill a roll cage efficiently.

Although the new system is already working as expected, Euro Shoe Unie is certain that efficiency per employee can still be raised significantly.

B. Rayen: So far we have turned a blind eye to many a minor inefficiency, because we first wanted to make sure that all the goods would be at the right place at the right time. But we are convinced that improvements can still be made, especially in the organisation of our order picking process. We are still losing time switching over from one pick wave to the next. We are now starting to optimise all our activities.

We estimate that the entire investment, including the new facility, will be recovered in just seven years through savings on personnel costs alone. Taking into account that the sale of the old building in Diest will raise funds and that the running costs of the distribution centre are much lower now, we estimate the actual payback time is five years.

Eventually, the facility will be run with eighty staff in two shifts in peak periods and with fifty staff in two shifts in non-peak periods. Up to now this number has been exceeded by hiring too many temps, mainly in peak periods, to be able to handle the volume. The fact that you cannot always use permanent workers in certain strategic positions sometimes leads to mistakes, Bart Rayen explains.

Euro Shoe Unie is now considering its options to further improve its operations.

B. Rayen: Right now, the flow racks are really only used for the first sortation of goods to stores in peak periods. This basically means that they are unused for about half the year. That is why we are considering using them partly for restocking as well. This would save quite a lot of time, since we would be picking from high bay storage less often. Provided that we make sure that all restocking pallets have been removed from the flow racks by peak season, this could work. We would also prefer to reduce the zone with the baskets, as this is very labour-intensive, especially where low-value goods are concerned. We have recently hired a new logistics manager to further investigate and develop these ideas.

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